AIRLINES FINANCIAL MONITOR
KEY POINTS
December-January 2013

Airline share prices continue to outperform as financial markets upgrade their outlook on airline profits;

Early Q4 profit results show a pause in the recent improvement, with US results below year ago levels, but
the majority of indicators moved in a positive direction in Q4;

In the new year, jet fuel prices rose back above $130/bbl, after OPEC cut crude oil production in December;

Passenger and freight markets finished 2012 strongly, supported by a further increase in business
confidence;

Airlines kept capacity growth below the increase in demand, despite an acceleration in the growth of the inservice fleet;

As a result, freight load factors improved in December and passenger loads moved up to record levels;

Passenger yields have leveled out but remain up on last year after adjusting for exchange rate effects.
Financial indicators
Airline share prices outperform as market optimism on airline profits increases
Bloomberg Airlines Index
Source: Bloomberg
180
US $ based index equal to 100 in 2007
160
Asian Airlines
140
120
100
80
60
World Airlines
US Airlines
40
European Airlines
20
0
 Financial markets continue to improve
their outlook for the airline industry, with
the Bloomberg Airlines Index up 7% in
January
compared
to
December,
outperforming the 5% rise in the FTSE
Global All Cap Index. Improved efficiency
measures and restructuring efforts
helped airlines achieve better than
expected financial performance in the
second half of 2012. As a result, markets
continue to upgrade their valuation of
airline shares, particularly in Europe and
North America, where prices rose 10% in
January compared to December.
Initial Q4 profits data show a pause in the improvement of airline profits
In US $ Million
# Airlines
9
4
2
0
0
15
Region
North America
Asia-Pacific
Europe
Latin America
Others
Sample total
Q4 2011
Q4 2012
Operating Net post-tax Operating Net post-tax
profit
profit
profit
profit
1453
367
845
-181
549
134
468
198
25
2
32
19
0
0
0
0
0
0
0
0
2027
503
1345
36
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 Initial Q4 2012 financial results show
positive airline industry profits, but a
decline on the year ago period. The
sample of 15 airlines shows the
improvement in the US stalling across
most airlines in the region, and little
further improvement in Asia-Pacific.
Despite these results most indicators of
profitability, described below, were
moving in a positive direction in Q4.
Airlines financial monitor –December-January 2013
Fuel costs
Jet fuel prices rise back above $130/bbl in January
 Upward pressure on jet fuel prices
eased at the end of 2012 but has once
again started to rise. Compared to the
recent low in November, jet fuel prices
have risen 5% in January, edging
toward the higher-end of the price range
seen over the past 2 years.
Jet Fuel and Crude Oil Price ($/barrel)
(Source: Platts, RBS)
200
180
Jet fuel price
160
140
120
100
 Increasing oil supplies from non-OPEC
nations helped stabilize prices at the
end of 2012. But this has been
countered by Saudi Arabia’s cut in
crude oil production in December,
leading to rising oil prices in January.
80
60
Crude oil price (Brent)
40
20
Demand
Air freight markets rebound as passenger volumes continue to increase steadily
Total air travel and air freight volumes
Seasonally adjusted
17
Source: IATA
450
16
410
RPKs
15
390
370
14
FTKs
350
13
330
FTKs per month, billion
RPKs per month, billion
430
310
 Air freight markets contracted 1.5%
overall in 2012, but a more supportive
business environment and stronger US
consumer confidence at the end of 2012
has helped volumes recover to mid2011 levels.
12
290
270
11
2007
2008
2009
2010
2011
 Global air travel markets started to
improve at the end of 2012, helped by
business confidence continuing to
increase throughout Q4. Although
downward pressure on demand from the
Eurozone crisis saw a slowdown in the
high growth rates seen at the start of
2012, air travel expanded by 5.3%, only
slightly down on 2011 growth of 5.9%.
2012
Capacity
Passenger and freight capacity growth kept slower than expansion in demand
Total passenger and freight capacity
Seasonally adjusted
Source: IATA
37
560
36
ASKs
ASKs per month, billion
38
540
35
520
34
33
500
AFTKs
32
480
31
460
30
440
29
2007
2008
2009
2010
2011
IATA Economics: www.iata.org/economics
2012
AFTKs per month, billion
580
 Passenger capacity increased again in
December. But airlines are still keeping
the expansion at a slightly slower rate
than the increase in demand. And this is
being done despite the number of new
aircraft deliveries remaining strong.
 Air freight capacity contracted slightly in
December compared to November,
despite airlines seeing further growth in
air freight volumes over the month. This
continues the declining trend in air
freight capacity started in mid-2012.
2
Airlines financial monitor –December-January 2013
Growth in seats spikes as aircraft come out of storage
Airline fleet development
Source: Ascend
Other factors
Storage activity
% change in seats m-o-m
1.1%
150
0.8%
100
0.5%
50
0.2%
0
-0.1%
-50
-0.4%
-100
-150
-0.7%
-200
-1.0%
% change in airline seats
Change in operating fleet (a/c per month)
Deliveries
200
 Growth in seats increased significantly
in December with 142 new aircraft being
delivered and a net 22 aircraft coming
out of storage. This has brought the rate
of new seats added to the fleet to a 10%
annualized growth rate, a significant
increase on previous months when the
same measure was in the range of 24%.
 Growth in new seats added to the fleet
is now above the highs seen in mid2012, and also above the current
expansion in ASKs. A continuation in
the trend could see asset utilization
rates come under downward pressure.
Air freight load factors rebound as passenger loads reach record-high levels
Total load factors on passenger and freight markets
Seasonally adjusted
Source: IATA
82%
52%
50%
Freight
load factor
80%
48%
78%
46%
Passenger
load factor
76%
44%
74%
42%
72%
40%
70%
2007
Freight load factor, % AFTKs
Passenger load factor, % ASKs
84%
38%
2008
2009
2010
2011
2012
 Airline capacity management continues
to provide support to passenger load
factors, which increased again in
December over the prior month. In fact,
throughout 2012, load factors have been
kept near record-high levels.
 In December, air freight load factors
rose further as demand increased and
capacity contracted. In line with the
rebound in air freight volumes, load
factors have also risen back to mid-2011
levels.
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Yields
Passenger yields have stabilized but remain up on a year ago in local currency terms
Average return fare worldwide and US airlines yields
(seasonally adjusted)
550
US airlines yield
(left scale)
Yield (cents/RPM)
16
525
15
500
14
475
13
450
12
11
2007
Average return
fare worldwide
(right scale)
425
400
2008
2009
2010
2011
IATA Economics: www.iata.org/economics
Fare (US$/passenger)
17
 Passenger yields appear to have
stabilized. In the US yields have been
trending sideways since the second
quarter of 2012, after experiencing an
increase for more than 2 years.
 Globally, average passenger fares have
diverged from US yields since early
2011, but this has been a result of the
translation effect of the strengthening
US dollar. In local currency terms, global
passenger yields have been increasing
and are above year ago levels.
2012
3
Airlines financial monitor –December-January 2013
Data tables
Year on Year
Comparison
Dec 2012 vs. Dec 2011
2012 vs. 2011
RPK
ASK
PLF
FTK
AFTK
FLF
RPK
ASK
PLF
FTK
AFTK
FLF
Africa
6.3%
3.7%
69.0%
10.9%
5.5%
25.4%
7.2%
6.5%
67.7%
7.1%
9.2%
24.7%
Asia/Pacific
6.3%
4.6%
76.6%
-3.8%
-2.9%
58.4%
6.0%
5.2%
77.5%
-5.5%
-2.4%
56.1%
Europe
1.6%
-0.2%
77.4%
-1.8%
-7.7%
52.6%
5.1%
2.9%
79.6%
-2.9%
0.3%
47.2%
Latin America
7.7%
4.4%
76.2%
3.0%
4.4%
38.6%
9.5%
7.5%
76.1%
-1.2%
4.9%
38.3%
Middle East
12.6%
11.8%
77.3%
15.7%
10.7%
45.8%
15.2%
12.4%
77.5%
14.7%
11.4%
44.8%
North America
1.0%
0.2%
81.5%
-0.7%
-2.8%
35.6%
1.1%
0.1%
82.9%
-0.5%
-2.0%
35.0%
Total Market
4.2%
2.7%
77.9%
-0.3%
-1.9%
47.0%
5.3%
3.9%
79.1%
-1.5%
0.2%
45.2%
RPK: Revenue-Passenger-Kilometers; ASK: Available-Seat-Kilometers; PLF: Passenger-Load-Factor; FTK: Freight-Tonne-Kilometers; AFTK:
Available Freight Tonne Kilometers; FLF: Freight Load Factor;
All Figures are expressed in % change Year on Year except PLF and FLF which are the load factors for the specific month.
IATA Economics
th
4 February 2013
IATA Economics: www.iata.org/economics
4